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Posts tagged ‘CopperBank Resources Corp (CBK)’

A new era of energy depends on mining and especially copper, says Gianni Kovacevic

by Greg Klein

Gold and precious metals can attract people seeking wealth or beauty, while diamonds and other gems convey an intrigue of their own. But who becomes downright passionate about a base metal? To those who’ve head him talk, Gianni Kovacevic quickly comes to mind. Copper’s his metal of interest but his real fascination is the future—that, and a vision of the importance this metal holds to a new era of energy history.

Chairperson of CopperBank Resources CSE:CBK, an authority on energy systems and author of My Electrician Drives a Porsche?, he’s an especially engaging public speaker who’s possibly more effective than anyone in communicating mining’s importance to non-mining people.

The era of electrification offers promise to both developed and emerging economies, says Kovacevic.

But those in the industry find his message captivating too. He calls mining, metals and especially copper “the great enabler” of electrification. And electrification’s the key to a new era in which copper usage will grow by magnitudes, he declares.

That’s happening already as developed countries wean themselves off fossil fuels and emerging countries use more and more electricity for consumer items and transportation or—from village to village and home to home—as they adopt electricity for the first time.

Among other vital metals are aluminum, lithium, vanadium and cobalt. “I like anything that enables electrification,” Kovacevic explains. “The sensitive one is cobalt. If people are talking about reducing cobalt in batteries or eliminating it altogether, who wins? Nickel. But no question about it, we will require hundreds of millions, in fact billions, of new battery cells.”

Overall, approximately 19% of energy use now comes from electricity, he says. But he expects the number to reach about 50% by 2050. His data for current and planned copper production, however, shows alarming shortfalls in capacity.

Half of the world’s primary copper production now comes from 25 mines. Just two countries, Peru and Chile, provide a combined 45%. One major copper mine, First Quantum Minerals’ (TSX:FM) Cobre Panama, has commissioning planned this year. Nothing else over 110,000 tonnes is expected until around 2022.

First Quantum’s Cobre Panama will be the only major new copper mine until about 2022, Kovacevic says.

In 2010 the 15 largest copper producers boasted average grades around 1.2%. The 2016 average was 0.72% and falling. Over the next half-century he expects average grades to slip below 0.5%.

Clearly more copper production will require much higher prices to make lower grades economic, Kovacevic emphasizes. He’s not alone in that outlook. Among others extolling the metal’s virtues is Robert Friedland, who also considers copper the key to electrification and maintains that declining grades will require higher prices.

Over the last nine months, however, prices haven’t co-operated. In late May spot copper approached a five-year high in the range of $3.30 a pound, but fell steeply after June 1. Current prices sit around $2.60 to $2.65, although that’s well above levels seen through most of 2015 and 2016. But Kovacevic says warehouse inventories suggest the market has reached a supply deficit.

Two decades of prices show an ironic connection with the commodity that fueled the previous energy era, he adds. “Copper’s never left its long-term bull market but it’s been pushed around by oil, because 90% of the time it’s correlated with oil. But now the prices have to decouple. Copper has to go much, much higher.”

Referring to himself as a “realistic environmentalist,” Kovacevic says the metals and mining crucial to the new energy era also remain crucial to emerging societies. Blocking new mines from development hinders new economies from development. “I can’t say to someone in India, for example, that they’re never going to have electricity or running water in their homes. You can’t say ‘build absolutely nothing anywhere near anyone.’ People want basic human progress. Fortunately, as we go into this new pivot of energy we’re going to bypass the old ways of receiving energy in many applications.”

Evangelist he may be, but Gianni Kovacevic’s hardly a voice crying in the wilderness. His favourite metal displayed stellar performance last year, reaching more peaks than valleys as it climbed from about $2.50 to nearly $3.30 a pound. But Kovacevic believes copper has a long way to go yet. That will be a function of necessity as the metal shows “the strongest demand growth of any of the major commodities.” Especially persuasive in his optimism, Kovacevic brings his message to the 2018 Vancouver Resource Investment Conference on January 21 and 22.

As a researcher, commentator and investor who’s also the CEO/chairperson of CopperBank Resources CSE:CBK, co-founder of CO2 Master Solutions Partnership and author of My Electrician Drives a Porsche, he brings new approaches that link topics of energy demand, commodity supply and environmental stewardship.

Kovacevic sees a new paradigm driving copper’s future. “The invisible hand in commodities during the last cycle was China,” he says. “Its economic growth just came out of nowhere. This time the invisible hand is this pervasive use of copper in everything that’s electrified. That means even the smallest village in Africa, which per capita has negligible copper consumption, is becoming a line item. When you create, transfer and utilize greener and cleaner energy, it takes more copper by a power of magnitude. For example to establish a megawatt of windpower it takes five times more copper than it does a megawatt of conventional thermal-generated energy.”

Then there’s the battery-powered revolution and the attention it’s brought to lithium, cobalt and graphite. Saying “I like anything in electric metals,” Kovacevic stresses the importance of nickel as well. Still, “copper wins because the interconnectivity will always be copper and copper plays a role in each battery as well.”

That leads to a supply problem that can have only one solution. “I believe we’re going to have to make uneconomic deposits economic. And there’s only one way to do that—with a higher copper price.”

With no foreseeable hope of a copper mining “renaissance” comparable to the effect that fracking brought to oil and gas, the metal will simply require more money. “We’ve got the old legacy mines,” Kovacevic points out. “We’ve spent a lot of money on exploration in the last cycle and didn’t find a lot. What we do have is lower-grade resources. They are simply not economic at a low copper price.”

Kovacevic: Electrical generation, storage and connectivity put copper at the top of energy metals.

Apart from diminishing grades, the business of putting new mines into operation is “taking longer with water, electricity and permitting issues, and it’s getting into funkier places,” he continues. “The Elliott Wave [technical/fundamental analysis] on copper is $7.50 a pound. I find that very interesting. All the buy-out action in the copper space happened for the most part between 2006 and 2012. The mean price for copper during that time was about $3.50 a pound. The all-time high was about $4.50 for a short while, but the mean was $3.50.”

Copper’s 2017 performance makes that figure look viable again. Kovacevic, however, cites analysis from BHP Billiton NYSE:BHP stating that 75% of future projects will require more than $3.50. “Could we see a scenario in which the copper price goes past the old all-time high and stays there for a while? And will the buy-outs in the next wave, if they occur, be higher on average than those in the previous 2006-to-2012 cycle? I believe the answer will be yes. But if you look at the average grade that went through the top 15 copper producers’ mills in 2010, it was 1.2% copper. In 2016 it was 0.72% copper. So if you were mining 30 million tonnes a year, now you have to mine 40 or 45 million tonnes for the same metal yield. And without higher copper prices, that doesn’t make much of a business case.

“So the first question is, are we going to need more copper in the next five, 10, 15 years? The answer in my opinion is yes. In fact it has the strongest demand growth of any of the major commodities. And where will that copper come from? Well, it’s going to come from a mix of places but we’ll have to make these projects economic. That should bode well for people who have invested in the copper junior space.”

Addressing the topic of how investors might look at the energy revolution in 2018 and beyond, Kovacevic speaks at the 2018 Vancouver Resource Investment Conference, to be held at the Vancouver Convention Centre West from January 21 to 22. Click here for more details and free registration.

The event takes place in familiar surroundings at the Vancouver Convention Centre West from May 31 to June 1. But while Canvest ’15 has become an annual institution, it’s one that adapts to the times. That gives mining and exploration investors a chance to not only catch up with companies’ progress but learn more about the convergence of commodities with energy and technology. Nearly 40 speakers will present talks, panel discussions, corporate presentations and workshops, along with almost 100 exhibitors ready to meet investors one-on-one.

Shown here at last year’s Canvest, Chris Berry emphasizes the importance of learning about energy minerals and their supply chains.

Considering the challenges of resource markets, Chris Berry credits Canvest organizer Cambridge House International for this new approach. “I think a lot of stakeholders in the natural resource space are searching for the new model,” says the Disruptive Discoveries Journal co-editor. “My sense is that Cambridge House may be on to something by trying to broaden its scope and provide opportunities for investors to get some insights into how natural resources and technology are converging.”

With such a broad range, not every sector links up with each other. But topics include mineral exploration, oil and gas, liquefied natural gas, agriculture, life sciences, energy metals, technology and—appropriately for a city where weed wafts ubiquitously—marijuana.

Canvest’s opening day promises to keep Berry busy with a keynote talk and four panel discussions. “My presentation will focus on disruptive technologies, not so much in the mining space but in the economy, taking a macro view of some of the forces I think are converging right now that make learning about disruptive business models and the potential for metals demand very, very important,” he says.

Even with minerals markets facing a prolonged downturn, Berry sees signs of hope. “I think the really optimistic and bullish case has to do with how quickly energy technologies, and technology in general, are being adopted and advanced. Longer-term, you want to be looking at a country like India. It’s much less urbanized than China, which served as the engine for metal demand.”

Cambridge House describes its speaker line-up as “top industry analysts, newsletter writers, c-suite executives, hedge fund managers, trends forecasters and finance celebrities.” Twenty “young” clean tech companies will take their places at the new PowerHaus Pavilion. Events that aren’t formally on the agenda but remain well-entrenched Canvest customs include networking, schmoozing, gossiping and maybe just a bit of rumour-mongering.

Gianni Kovacevic says Canvest offers exposure to bold new technologies as well as essential commodities.

Sunday’s 8:30 a.m. opening features a keynote presentation by Gianni Kovacevic, chairperson of CopperBank Resources CSE:CBK and author of My Electrician Drives a Porsche? His talk covers emerging markets, their “new spending class,” the merger of technology and energy, and other aspects of “the new energy renaissance.” He’ll also discuss his book, in which Kovacevic expresses his ideas through the interplay of two fictional characters, a boomer-generation doctor and a younger tradesman who became a canny investor by studying new and emerging trends.

Kovacevic will be giving away free copies of the novel.

He sees positive signs for the minerals sector through the simple necessity of supply. “Nobody’s building anything new of significance—I mean big, big new mines,” he says. “Ultimately you need a stronger underlying commodity price or nothing’s going to get built, so it’s a matter of time.”

A veteran of previous Cambridge House events as well as other investor shows, Kovacevic expects to see a lot of new faces among Canvest’s new diversified exhibitors. As for returning companies, he says they’ll offer investors a report card on their progress.

“The hard core resource investor talks to the 30 people he always talks to, he meets five or 10 new guys, he kicks the tires,” Kovacevic explains. “Even if you’re not going to invest right now, you’re going to see a company you like and you’re interested in, and if that sector moves or that company moves, you get very interested very quickly.”